The Internal Revenue Service's strategy for a second iteration of a key modernization effort still lacks some definition, according to an annual Government Accountability Office review of IRS modernization spending.

Specifically, the IRS has yet to complete a strategy that includes how it will establish a single processing system for tax returns. The tax agency mostly relies on a magnetic tape mainframe system from the 1960s to house all taxpayer data, but in recent years has made use of a modern relational database called the Customer Account Data Engine to process uncomplicated individual returns. The IRS halted development of the CADE in 2009; it processed approximately 39 million tax returns that year.

CADE is part of a decades-long IRS modernization effort started in 1999 on which the tax agency has already spent $2.8 billion.The IRS began defining in August 2008 a new strategy for CADE, referred to as CADE 2.

The new approach, the IRS says, will deliver a fully functioning relational taxpayer account database in two years rather than the minimum of 7 years required by CADE.

The IRS has taken several actions that "increase the likelihood" that CADE 2 will be successful, the GAO report states. Business units have been involved in planning, a program management office is up and running and independent assessments have validated the IRS's approach, the report adds.

CADE 2 is meant to come on starting in 2012 in a two-phase approach, but some planning for the second phase remains, the GAO report adds. The planning critical for laying ground work that will allow CADE 2 to integrate with other IRS systems--and of course, shutting off the old technology--the GAO report states.

For more:
- read GAO report 10-539 (.pdf)
- read GAO report 09-640, an earlier report that addresses some of CADE's problems

Related Articles:
IRS online tool wrongly rejects tax returns
IRS halts modernization, for now